It has become common for couples to enter into Financial Agreements (or Prenuptial Agreements) as a way to protect their assets and finances in the event of a separation. The idea of talking about the end of your marriage before it has even begun can be rather daunting and intimidating. However, while no one ever plans for divorce, it can happen, and a Financial Agreement may help to limit unnecessary stress and conflict in these circumstances.

What is a Financial Agreement?

 A Financial Agreement is a legal contract made between the parties to a relationship which outlines how their property and assets will be dealt with in the event of a relationship breakdown.

Financial Agreements can be signed by couples before they get married. If one spouse owns significantly more in assets than the other, or their parents have businesses or an inheritance that they wish to retain if the relationship ends, a Financial Agreement can ensure that these assets are protected. It is also possible to enter into an agreement after a couple is married. For example, if during their marriage, one of the spouses’ parents win the lottery, the parents may wish for the inheritance money to be passed down to their child only.

In December 2000, Financial Agreements were officially sanctioned by legislation in Australia to enable couples to think about and plan their future rights and responsibilities through a binding financial agreement. The ability to sign a Prenuptial Agreement extends beyond marriage and is also open to de facto and same-sex couples.

What Do Financial Agreements Cover?

Unfortunately, Financial Agreements are not romantic. They are a practical way of ensuring both partners are protected in the event the relationship does not work out.

The terms of a Financial Agreement can cover a wide variety of matters, including:

• What assets will be divided and in what proportion in the event of separation?
• What will happen in the event of the death of one partner? In most states, your spouse will inherit a portion of your estate if you pass away, and vice versa. If you do not wish for this to happen, this can be covered in the terms of your Prenuptial Agreement.
• A predetermined amount of spousal maintenance.

Prenuptial Agreements do not cover custody of children or child support payments. Other provisions, such as clauses about a person’s weight, frequency of sex, household cleanliness and infidelity punishments, are sometimes included, but they are often deemed unenforceable by the Federal Circuit and Family Court of Australia (the “Court”). Financial Agreements are predominantly used for the financial arrangements of a couple before, during and after separation.

How can I get a Prenuptial Agreement prepared?

Australia has strict requirements for valid Financial Agreements. If they are not drafted correctly, they may be deemed invalid by the Court or completely set aside. For this reason, it is extremely important to engage a lawyer when drafting a Financial Agreement. Spending money now is a more sensible option than engaging in litigation proceedings down the track for an invalid Financial Agreement.

Can Financial Agreements be set aside?

Financial Agreements are generally legally binding, meaning the jurisdiction of the Court ceases to apply once a Financial Agreement is made. This means that if the Financial Agreement is originally signed by both parties, and each party receives independent legal advice about the advantages and disadvantages of the Financial Agreement, it will remain binding, unless the parties mutually agree that this is no longer the case.

However, there are circumstances where the Court can set aside Financial Agreements. These include:

• Non-disclosure of a material asset/financial resource.
• The agreement was entered into under duress or involves unconscionable conduct.
• Since entering into the Financial Agreement, a material change in circumstances has occurred relating to the care, welfare, or development of a child of the marriage. If the Financial Agreement does not make provision for this change to the primary carer, and it would result in hardship, the Court may set aside the Financial Agreement.

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There are various reasons why couples decide to enter into a Prenuptial Agreement. A Prenuptial Agreement is generally a great way to protect your assets, provide you with peace of mind and financial empowerment. However, as every couple is different, it is important that both you and your partner freely discuss, agree and feel comfortable about the idea of a Prenuptial Agreement.

We cannot stress the importance of engaging an experienced family lawyer in preparing a Prenuptial Agreement. It is important to ensure that the agreement complies with all legal requirements so that you do not face invalidity of the agreement down the track.

Our experts in family law can assist with the preparation of compliant Prenuptial Agreements. If you need legal guidance tailored to your unique circumstances, please contact Etheringtons Family Lawyers in North Sydney on (02) 9963 9800 or via our contact form.